As a retail business owner, you know there are a variety of components that go into running a successful operation. From inventory to payroll to rent and utilities, you can’t risk being low on cash flow. If you’re unable to afford any of the expenses mentioned, in addition to others, you’ll risk having to close your doors. Luckily, that’s where financing for retail businesses comes in!
If you’re low on cash, there are numerous financing options that you can pursue to invest in your retail business. There are pros and cons to each, and we’ll explore them in this post. Keep reading to find out about the different financing options that are available to retail business owners like you!
1. Business Loans
One of the first financing options you considered was probably a business loan. Your retail business can apply for a business loan through a bank or alternative lender. If you’re in need of fast financing, we recommend applying through an alternative lender, since their underwriting process will likely be faster than a bank.
With a business loan, you’ll be given a lump sum that you’ll need to repay in a set term. When considering a retail business loan, we recommend ensuring that you’ll be able to repay your loan in that term, so that you don’t overextend your finances. If you’re unable to pay back your loan on time, you’ll risk racking up significant debt, in addition to interest payments.
2. Merchant Cash Advances
Most likely, your retail business accepts credit cards as payments. Due to this, you could be a strong candidate for a merchant cash advance.
Once approved for a merchant cash advance, you’ll receive a lump sum that is remitted based on your retail business’s future credit card sales. For example, if your business earns more credit card transactions during the holidays, you’ll remit more at that time than you would during slower seasons.
Overall, cash advances can be a great fit for retail business owners. Still, if you don’t receive consistent credit card sales in small volumes, this might not be the right product for you.
2. Credit Cards
Many retail business owners open at least one credit card account, so that they can pay for expenses even if they don’t have cash on-hand in the moment. If you’re in need of financing, you should consider applying for a business credit card. When conducting research, look for cards that have rewards that will benefit your business. For instance, if you take frequent business trips, you should choose a card with travel perks. Or, if you want to earn money from purchases, you could apply for a card with cash back rewards.
In addition to rewards, make sure that the card doesn’t come with hidden fees that you won’t be able to afford. Once approved for a card, you’ll need to ensure that you use it responsibly. It might be tempting to charge every business expense to this card, but you shouldn’t overspend. If you wrack up significant debt, this could hurt your business in the long run.
4. Lines of Credit
With a revolving business line of credit, you’ll be given a limit that you can’t exceed. When you borrow from the line, your limit will decrease until you repay the amount that you borrowed. Some providers might also offer nonrevolving lines of credit, which also have a limit, but when it has been met, it can’t be used again. You’ll need to apply for another line if you need more financing.
Before applying for a line of credit for your retail business, there are a few aspects to consider. For instance, if you have a poor credit score, you may be required to secure the line by submitting collateral (such as real estate, equipment, or vehicles).
5. Inventory Loan
To purchase items to sell at your retail business, you could benefit from receiving an inventory loan. You could also utilize an inventory loan to purchase items that are needed to run your business.
This financing will come with set terms and must be used to purchase business inventory. If you’ve had trouble being able to afford inventory, you might benefit from applying for this type of financing.
6. Small Business Administration Loans
The Small Business Administration (SBA) provides numerous financing options available to business owners. Below, you’ll find a list of their offerings.
It’s important to note that you won’t qualify for an SBA loan if you can’t prove that you’ve applied for traditional forms of financing, and have been unable to get approved for them. They also have other prerequisites relating to your credit score, financial history, and potential collateral requirements. While the SBA has a variety of options, you shouldn’t pursue their loans if you don’t meet these requirements. Instead, try applying for other options mentioned in this post, and use SBA loans as a last resort.
Choosing the Right Retail Financing
After reading this post, we hope that you have a better understanding of the retail financing options that are available to you. Every business is different and will have different financing needs. If you are equipped with adequate financing, you can better serve your customers, and improve your overall retail business. Good luck!